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This study examines the market reaction to repurchase announcements by TSX firms. These announcements result in a significant market reaction as evaluated by abnormal return and volume tests. Further analysis indicates that firms that have followed through on past repurchase announcements and have cash on hand experienced greater announcement returns. However, most reasons provided by TSX firms for their repurchase programs were not found to be informative. These results provide little support for the TSX requirement for firms to disclose a reason for their repurchase programs. The results do support the TSX requirement to disclose repurchases since these disclosures appear to provide investors with useful information when interpreting subsequent repurchase announcements.

The findings of this study may be of interest to regulators in other jurisdictions. U.S. exchanges are currently contemplating increased disclosures for stock repurchases. The TSX may wish to consider the findings of this study in the course of reviewing their own regulations. This study contributes to the literature on reputation by examining whether management’s follow-through on previous repurchase announcements affects the market reaction to subsequent announcements. This study contributes to the literature on stock repurchases by examining whether the additional information provided by TSX firms (timely reports, disclosure of the reason for the repurchase program) is useful to the market. Finally, this study contributes to the repurchases literature by introducing volume testing into the study of repurchase announcements, applying Cready and Hurtt’s (2002) finding that volume tests are more powerful than return tests when investigating investor response to an information event.